LAUSR

Acquisitions of small high-tech firms by large incumbents are a prominent mechanism for external knowledge sourcing, whose success strictly depends on the choice of a wise post-acquisition implementation strategy. This paper theoretically discusses and empirically documents - on a sample of 458 deals in the 2001–2005 period - the antecedents of this choice by focusing on the integration-autonomy dilemma. Specifically, we jointly consider two main dimensions of the post-acquisition implementation: whether the acquiring firm absorbs the acquired one into its organization or keeps it separate as an autonomous subsidiary/business unit and whether the acquired CEO is replaced or retained. Separation with CEO retention corresponds to the minimum level of integration (and the maximum level of autonomy), whereas absorption with CEO replacement corresponds to the maximum level of integration (and the minimum level of autonomy.) We hypothesize that the acquiring firm chooses an implementation strategy with high level of integration when the acquired firm produces a component technology or operates in a related market. Indeed, in both cases, the interdependency between the two firms is high and thus the benefits of integration likely exceed the costs of the loss of autonomy. However, this positive association is weaker when the acquiring and acquired firms have common ground, originating from technological relatedness or prior alliances, which acts as a low-cost coordination mechanism. Results of econometric estimates largely confirm our hypotheses.